Retirement planning in your 30s

As you enter your 30s, you may find yourself feeling the pressure to save for your future.

While starting your saving journey can seem daunting, it’s important to take steps now to ensure that you’ll be able to enjoy financial security in the years to come. This article will explore the pension landscape and what financial milestones to prioritise during this decade of life.

Pension landscape in your 30s

Research from PensionBee found the UK pension landscape varies by region, age and gender, of savers. In 2021, the average men’s pension pot totalled £12,075, while the average women’s pension pot was £9,537, among savers in their 30s. This highlights a 21% gender pension gap. However, the good news is savers currently in their 30s are projected to have an average pension pot size of £135,900 by the time they’re 65 years old. This projection is higher than savers currently in their 40s (£112,900) and 50s (£87,500).

Why are savers in their 30s expected to be better off at retirement? Under UK law, all employers must offer a workplace pension and automatically enrol their eligible workers into the scheme. But this wasn’t always the case; Auto-Enrolment was introduced in phases between 2012 and 2018. This means younger people who are eligible under Auto-Enrolment rules will have the benefit of these additional employer contributions for the majority of their working life.

Financial planning in your 30s

Budgeting your daily expenses

Your 30s are often a time of major life changes: like possibly getting married, having children, or buying a house. With these financial commitments, it’s important to have a budget in place to ensure your money’s being used in the most effective way possible.

First, track your expenses. Make a list of what you need to spend money on and what’s just an extra. This will help you allocate your money towards the things that matter most. Start following your expenses and income to get an accurate picture of your financial situation.

Second, set a goal. Think about what you want to achieve financially in your 30s. Are you looking to save for a down payment on a house, or are you trying to pay off debt? Once you have a goal, you can create a budget that will help you stay focussed.

Third, make a budget. Your budget should include a plan for savings and investments, as well as paying off any debt. Review your budget regularly and make adjustments as necessary. This will help you stay on track and get the most out of your money.

Saving towards home ownership

Owning your own home’s a big step, and often requires a lot of initial savings for a deposit, along with a commitment for ongoing mortgage payments. In your 30s you may choose to leave the rental market and start your home ownership journey.

You’ll want to look at what kind of down payment you can make and what kind of monthly mortgage payments you can handle. Most banks will require you to save at least 10% of your home’s purchase price for your mortgage deposit.

Don’t forget to consider the tax benefits. In the UK, the government offers under 40s unique benefits through a Lifetime ISA. You can use a Lifetime ISA for either the purchase of your first home or to fund your retirement, and contributions up to £4,000 annually will usually receive a 25% tax top up.

When you’re saving for a home, it’s also important to consider other costs. Mortgage advisor and solicitors fees, moving costs, repairs and renovations, can all add up. Make sure to factor these costs into your budget when you’re setting your savings goal.

Contributing to your pension

Pension saving’s a great way to ensure that you have enough money to live comfortably in retirement. In addition to a workplace pension you can also set up a personal pension with a defined contribution provider, such as PensionBee. With your personal pension, you can choose how much you want to save each month and you can also decide the type of investments you want to make.

It’s also important to remember that pensions come with tax advantages. When you save into a pension, you may receive tax relief on your contributions. Most basic rate taxpayers usually get a 25% tax top up; HMRC adds £25 for every £100 you pay into your pension.

Finally, it’s important to start saving for your retirement as early as possible. Don’t underestimate the power of compound interest. As over time compound interest can turn a small pension pot into a significant amount when left untouched.

Thinking about life insurance

You might think you’re too young to be thinking about life insurance, but there are benefits to taking out a policy in your 30s. You’re less likely to have health problems and the premiums are likely to be lower. So if you don’t have a current policy, it’s well worth looking into. LifeSearch offers mortgage life insurance, family life insurance and critical illness cover and if you aren’t sure what policy you need, you can speak to one of their experts or compare policies online.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

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